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SEC Hot Topics Seminar State of the Capital Markets September 14, 2010.

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Presentation on theme: "SEC Hot Topics Seminar State of the Capital Markets September 14, 2010."— Presentation transcript:

1 SEC Hot Topics Seminar State of the Capital Markets September 14, 2010

2 2 Economic outlook April 2010 November 2009 April 2010 November 2009 Downturn to end within 12 months Confidence in local economy Downturn in industries to end within 12 months 40% Of companies believe the global downturn will end within the next 12 months compared with 30% in % Of companies feel more confident about the prospects for their local economy than six months ago, the most optimistic being Australia 61% Of respondents expect the downturn in their own industries to end within 12 months, compared to just 49% six months ago *Data presented in slides 2-10 is based on an April 2010 survey of 817 executives by Ernst & Young LLP.

3 3 Capital-related issues are top-of-mind in boardrooms and C-suites Operational efficiencies/cost reduction Customer segmentation and profitability Performance monitoring of subsidiary businesses Supply chain risks/ performance Balance between fixed and variable costs Integrating previously acquired business

4 4 Priorities for investing capital

5 5 Preserving capital Companies are operationally restructuring to focus on performance improvement Wave of refinancing expected When restructuring what will be your priority? How soon are you likely to refinance loans or other debt obligations? 11% 26% 35% 28% years 1-2 years months Within 6 months November 2009 Other 20% Liquidity and working capital management 30% Performance improvement 50% Operational restructuring 24% Performance improvement 42% Capital/debt structure 14% Other 7% Liquidity and working capital management 13% April 2010

6 6 Raising capital Those with access to funding will be well placed to take advantage of opportunities As a result of the downturn, deal processes continue to evolve For companies that need access to funding for capital projects, when do you think this will become available? How likely is your company to execute divestments in the following time periods? 1-2 years6 -12 months0-6 months 25% 37% 30% 6% 1% Within 6 months 6–12 months 1–2 years 3–5 years Not in the foreseeable future More than 5 years

7 7 Capital markets 26% of all respondents stated that access to funding is not a problem for their company Wave of refinancing is expected with 58% of companies needing to refinance loans or other debt within the next four years Driving operational fitness and working capital management remains critical – 35% still need to restructure core business 62% expect financing to fund major projects available in the next 12 months 61% Of companies say that credit and capital conditions have improved in the last six months

8 8 Focusing on growth April % Of companies are focusing on growth, up 56% compared to six months ago

9 9 Optimistic deal market 6-12 months0-6 months Likelihood of acquisitions 57% Expect to make an acquisition in the next 12 months, up from 33% 47% Expect to do so in the next 6 months, up from 25%

10 10 IPO Market Overview SummaryAnnual U.S. IPO Market Statistics After almost disappearing entirely at the end of 2008 and early 2009, the IPO market has begun to return over the past several quarters There is significant investor interest around IPOs showing strong growth profiles, clear differentiation, compelling customer value propositions and experienced management teams In the first eight months of 2010, IPO volume totaled $65.9 billion across 210 deals compared to $15.9 billion and 46 deals over the same period last year Quarterly U.S. IPO Market Statistics

11 11 Follow-On Market Overview SummaryAnnual U.S. Follow-On Market Statistics Although the markets are open for business, investors are highly selective with the companies they chose to invest The number of follow-ons has remained stable but the amount of dollars invested has come off the highs of the latter quarters of 2009 which exhibit the pent up demand of investors In the first eight months of 2010, FO volume totaled $129.6 billion across 595 deals compared to $252.0 billion and 613 deals over the same period last year Quarterly U.S. Follow-On Market Statistics

12 12 Current IPO Backlog IPO Backlog There are currently 122 IPOs in backlog with an average deal size of $216 million. This is approximately three times the size it was at this point last year YTD Global financial sponsor backed IPO volume totals $19.7bn via 84 deals, a little over eight times the amount in 2009 YTD ($2.4bn via 8 deals) and close to five times the amount in 2008 YTD ($9.8bn via 39 deals). However, it is 49% lower than 2007 YTD ($38.5bn via 143 deals).

13 13 Current Follow-On Backlog Follow-On Backlog There are currently 42 Follow-on offerings in backlog with an average deal size of $166 million. Technology, Finance and Energy continue to lead all sectors in equity financings and remain popular with investors.

14 14 IPO and Follow-On Post Deal Performance New tech stocks have delivered on average 7.2% gain on their first day as public companies, compared to an average around 6% from all IPOs in the U.S., according to data from Ipreo.

15 15 Re-IPO Case Study KIT digital is a global provider of on-demand, Internet Protocol (IP)-based video asset management solutions that enable enterprise clients to acquire, manage and distribute video assets Between August of 2009 and April of 2010, the Company completed four separate underwritten public offerings off common stock In total, KIT digital raised over $145 million through the issuance of 13.6 million shares at an average discount of 1.5% to the previous days closing price The proceeds from the transactions helped the Company complete acquisitions, repay debt, retire warrants, and strengthen its balance sheet Liquidity in the stock is now almost 13 times higher than prior to the first offering Roth Capital Partners acted as the sole or lead underwriter on all four transactions Share Price Performance vs. S&P 500

16 16 Follow-On Case Study Kid Brands Inc., formerly known as Russ Berrie and Company, is a designer, importer, marketer and distributor of infant and juvenile consumer products, with a complete platform offering of 5,300 products for customers Toy R Us, Target, Walmart and others D. E. Shaw Laminar Portfolios decided to divest their interest in Kid Brands after having held the position since 2006 Through a collaborative marketing strategy involving Kid Brands, Roth was able to place D.E Shaws position to 51 institutional investors at a 6.9% discount to the previous days closing price, broadening the companys shareholder base and improving liquidity of its common shares On June 10, Kid Brands announced that D.E. Shaw had priced an underwritten secondary offering of approximately 4.4 million shares, or 20.4 % of common stock outstanding, for $7.25 per share, through a confidentially-marketed follow-on transaction managed solely by Roth Share Price Performance vs. S&P 500 Kid Brands Subsidiaries

17 17 Confidence returning to the markets Funding becoming more available Heightened uncertainty continues Investor focus on capital allocation Pent-up demand/supply in M&A markets Industries bifurcating: consolidators and consolidatees Deal processes continue to evolve In conclusion

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